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Can social enterprise revitalise purpose?

By June O’Sullivan, CEO of London Early Years Foundation

I have a vested interest in reviewing this book Vitalising Purpose: The Power of the Social Enterprise Difference in Public Services as I wrote a chapter! But really, I was interested to read the 17 essays from people who are running social enterprises or supporting them at a time when so many business leaders are desperate to shout about their social purpose leadership and green credentials.

For those who know little about social enterprises, who are interested in it, or doing a business degree and need to learn about it, then this is a great little book. It is short and readable. but explores some of the big economic and social challenges facing society which are being addressed by social enterprises. You can therefore imagine that the book pulls no punches about poverty and its impact on people’s lives.  It summarises some of the hardships, deprivation and health impacts that results from poverty. And in my world of child poverty, this is not an unfamiliar debate. It certainly pushes back at the argument that poverty is driven by the individual. Some of the statistics are pretty stark such as that 4.7 million households are in arrears to at least one household bill at an average of £1600! It is resonant of the view shared by Mohammed Yunus, that poverty is driven by structures and systems.

Just to get this into perspective, social enterprises are driven by social justice and deliver a range of public services including health, social care, children’s services, education, homelessness, housing, domestic abuse, public health, leisure, culture, employment, training, transport, criminal justice, working across local, central government and the NHS.  Some are small and local others are very large with a multi-million-pound turnover employing thousands. Collectively they contribute 60 billion pounds to the UK economy.  They remain active in their communities. Despite their size or location, they all demonstrate a flexible, entrepreneurial, fleet of foot, innovative and collaborative approach.

Set that against my pet hate, the patronising stereotype of the social sector doing good things but outside the grown-up economy. The cut price, pound shop, second best sector. This view which I think is often shaped by the traditional corporate social responsibility approach appears to reject our ability to trade and forces some social enterprises to be coy about using the word profit dressing it up as surplus. Profit isn’t a dirty word, it what you do with it that matter. Interestingly, eight out of 10 social enterprises have been successful in delivering services and if you look at the big business disasters, they weren’t social enterprises but companies like Carillion and ABC. If we compare social enterprises with the top 100 PLCs over a 30-year period, 41% of the top social ventures were likely to survive compared to 33% of the PLC’s.

The book emphasises the focus of the social enterprise business model which is to create and deliver public and social value underpinned by the concepts of purpose, values, collaboration, integration and the cultivation and stewardship of community partnerships.

It challenges the entrenched, dysfunctional focus by commissioners who continue to use a marketised competitive contracting approach with an emphasis on value for money rather than commissioning being designed 100% for the public benefit, despite having the Social Value Act. The darlings of macroeconomics with social purpose, Mariana Mazzucato and Kate Raworth’s Doughnut Economics add value to the debate that financial value should not be the sole determinant of public policy.  

The resulting value for money contracts often provided by extractive corporates are criticised as failing to deliver public benefit because they must prioritise returns to shareholders. They are therefore more liable to keep costs low by reducing quality, suppressing innovation and extracting resources from local areas of public authorities while not actually contributing to public value.

For example, in May 2022, an investigation found half of social care operators are owned by private equity firms based offshore; many of which are registered in countries known for their generous tax regimes! In the world of childcare, we’re seeing this more and more. This is against a backdrop of 77% of people who think businesses should maximise their profits, but not to the detriment of workers, customers, communities and the environment.  They are very alert to companies’ ability to green washing.

Interestingly, the Welsh Government is looking to eliminate the private profit marketplace for looked after children services because there should not be a market for care for children. Not surprising You Gov found that nine in ten members of public were in favour of social enterprises running public services.  I should imagine that number has consolidated given more recent debacles such as the privatisation of the UK’s water, described as an ATM for investors despite the wide condemnation of mismanagement, pouring live sewage into the rivers and raising household water bills by 40%. It makes a mockery of the discussion on impact and maximising social value and the principle that meeting social needs represents the best financial investment.

Every book has a Call to Action and this one is no different. Doing things differently won’t necessarily be technically difficult but will involve a paradigm shift in thinking. Business can be a force for progressive change especially when corporate, public organisations and social enterprises all learn from each other. The book makes it clear that social leaders must present an alternative business mindset which strengthens the triple bottom line and ensures economic, social and environmental sustainability is at the heart of the service.

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